Are Norms Efficient? Pluralistic Ignorance, Heuristics and the Use of Norms as Private Regulation

31 Pages Posted: 27 Mar 2009

See all articles by Alex C. Geisinger

Alex C. Geisinger

Drexel University Thomas R. Kline School of Law

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Date Written: March 27, 2009

Abstract

In a recent article in the National Law Journal, Richard Epstein argued that fear of social ostracism would effectively constrain lawyers in small communities from behaving unethically toward clients in the majority of situations. Epstein's embrace of norms as a "private" constraint on socially destructive behavior reflects a growing reliance, in law and economics, on social norms as an alternative or supplement to law. The belief that norms effectively limit negative externalities is itself based on a model that conceives of norms as arising from the cooperation of rational, self-interested individuals. While the basic model of norms as facilitators of cooperation lends itself to the current optimism regarding norm efficiency within the law and economics community, the question of norm efficiency or, more specifically, when norms are preferable to law as a means of regulating behavior, remains an open one. One of the main reasons why the question of efficiency remains unanswered is the inability of models, such as the iterated prisoner's dilemma, to describe comprehensively how norms form and develop.

Surprisingly, although norms by definition are social, there has been little effort by law and economics scholars to supplement the economics of norms with the sociology or social psychology of norms. This Article attempts to bridge this gap. It employs the need reinforcement model of norms developed by social psychologists and a number of other theories derived from cognitive and social psychology to provide a more complete understanding of the formation of efficient norms and to inform efforts to use norms in regulation. In particular, this Article builds on the efforts of Sanchirico and Mahoney, considering precisely how the desire for esteem that motivates us to follow norms affects the likelihood of efficient cooperation. It then builds on this understanding to provide guidelines regarding when community norms can and cannot be considered efficient. Along the way, this Article dispatches with one of the central tenets of social norm theory - the belief that norms formed in small, close-knit communities will be efficient.

This Article first introduces, very briefly, the rational choice model of norm formation. It then provides a short description of the need reinforcement principle and considers ways in which the principle adds to the current rational choice model of norms. In particular, it provides a basis for the claim that norms reflect the aggregate preference of members of a particular group, as well as a description of the psychological factors that lead individuals to identify and comply with group norms. The next section introduces the model of norm mismatch developed by Sanchirico and Mahoney and applies the sociology of norms to it, while also considering other issues relating to norm efficiency. Finally, this Article develops a set of criteria that must be considered before a presumption of norm efficiency can be established and considers the implications of the sociology of norms for norm-based regulation.

Keywords: Norms, Social Norms, Rational choice, Social Psychology, Cognitive Psychology, Expressive Law

Suggested Citation

Geisinger, Alex C., Are Norms Efficient? Pluralistic Ignorance, Heuristics and the Use of Norms as Private Regulation (March 27, 2009). Alabama Law Review, Vol. 57, No. 1, 2005, Drexel College of Law Research Paper No. 2009-A-07, Available at SSRN: https://ssrn.com/abstract=1369301

Alex C. Geisinger (Contact Author)

Drexel University Thomas R. Kline School of Law ( email )

3320 Market Street
Philadelphia, PA 19104
United States
215-571-4792 (Phone)

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